Wireless

The electronics industry is still hurting, but better times could be here before you know it.

Research firm Gartner says it has spotted a recovery already percolating for the sectors including PCs and mobile phones, with a sustained recovery pattern likely to take shape in 2010. What's holding back the optimism for a faster rebound this year, according to Gartner, is continuing uncertainty about the economy as a whole and, more specifically, about the effectiveness of government stimulus plans, especially when the stimulus runs out.

Gartner's forecast on the electronics industry was compiled for a report called "Signs of Improvement for End-User Electronics Recovery," published in late September.

"Almost all sectors of the electronic equipment market have now hit bottom and await signs of 'first growth' in comparison with the same quarter last year," Klaus Rinnen, managing vice president at Gartner's semiconductor manufacturing group, said in a statement. "The first signs of growth will be led by seasonal buying patterns in the PC market during the third quarter of 2009, although other major sectors will not begin to show first growth, year-on-year, until 2010."

Gartner has revised its forecasts for recovery in each of the electronic segments it tracks. Its latest findings:

PCs: After bottoming out in the first quarter of 2009, the PC sector should enjoy a sustainable recovery in the third quarter of 2010. Computer sales will continue to be constrained by slow growth in IT spending, but consumer demand has held up better than expected and is likely continue to rise. Gartner has revised its forecast for PC sales upward, anticipating good performance in the U.S. and China.

Cell phones: The mobile phone sector also hit a low in 2009's first quarter but should be the first area to show sustainable growth by the first quarter of next year. Thanks to the popularity of smartphones and to demand in emerging markets, especially China, Gartner expects mobile phone production to sink only 8 percent in 2009, 4 percentage points less than it predicted in May.

Consumer electronics: Though consumers have scooped up LCD TVs and Blu-ray players, overall sales in most areas of consumer electronics were flat or down throughout 2009. Gartner sees the market in a state of limbo right now, expecting little growth until the second quarter of next year. Beyond that, the segment is unlikely to return to pre-recession levels until the first quarter of 2011.

"Although the first signs of recovery are starting to appear for the electronics industry," Rinnen said in the statement, "the damage from the current industry recession will be felt for a long time."

Once a niche market, online banking has grown into a widely-used tool for the average consumer.

Among 3,988 adults surveyed in the U.S. by Gartner Group, 47 percent said they now bank online. In the U.K, 30 percent echoed the same response.

Results varied according to income. Gartner found that over half of all consumers earning more than $30,000 in the U.S. and 15,000 pounds in the U.K. bank on the Internet. Among lower-income households, 25 percent in America and 17 percent in the U.K. use online banking.

"Over the past several years, online banking has been seen as a way of appealing to more affluent and younger clients," said David Schehr, Gartner research director. "However, what is becoming clear is that the overall level of consumer Internet use and the increasingly narrow segment of nonusers--particularly in the U.S.--are shifting the dynamics of who is using online banking and what they seek from it."

Among people who don't bank online, no one single reason was cited above all others, noted Gartner. Around 61 percent of U.S. households and 58 percent of those in the U.K. said they simply prefer to use other methods. However, 41 percent of U.S. consumers and 38 percent in the U.K. blamed security as the most important reason for not banking over the Internet.

Gartner conducted its survey in December 2008 and January 2009 and questioned people 18 years and older.

Overall, the number of households paying bills online is slated to jump 5.4 percent from 48 million this year to 63 million by 2014, according to another report from research firm Forrester.

The report notes the effect of bill consolidation sites, such as Yodlee and Corillian, where consumers can manage and pay all their bills. Such sites are starting to woo more people from the banks' own bill payment sites and will own a greater share of the market by 2012. Banks will need to do a better job spreading the word about their own online services, according to Forrester.

"eBusiness executives at banks need to work to establish earlier and stronger bill payment relationships with young affluents and other young adults," said Forrester senior analyst Edward Kountz. "To strengthen their position and better support these customers, banks need to add more payment options, deploy online and mobile alerts with greater visibility, and continue to hammer home the message that online bill payment is free."

The global economic crisis is taking its toll on the cell phone business, with sales even in the hot smartphone category also expected to slow in 2009.

Two major market research firms published figures for the fourth quarter of 2008 this week. And they each have bleak news for the cell phone industry.

IDC said it expects the volume of all mobile handsets to decline by 8.3 percent in 2009. And it expects sales of hot smartphones, like Apple's iPhone and Research In Motion's BlackBerry phones, to slow to about 3.4 percent growth. Smartphones have been a hot ticket for mobile phone makers over the past year. In December, IDC had predicted a growth rate for smartphones in 2009 to be about 8.7 percent.

But that forecast has changed. Ryan Reith, a senior analyst at IDC, said in a statement that the overall cell phone market was looking gloomier than expected due mostly to the economic crisis. And he said he expected all segments, including smartphones, to be affected in 2009.

Market research firm Gartner published similarly dismal numbers in its market share report for 2008. The firm said that smartphone sales in the fourth quarter of 2008 were only up about 3.7 compared to the previous year. And the firm noted that the growth rate had slowed from the previous quarter. In the third quarter of 2008, smartphone sales increased 12 percent compared to year earlier, and sales were up 16 percent in the second quarter. The firm blames the slowing growth on the deteriorating economic situation.

Still, market forecasters believe that smartphones represent the biggest opportunity for mobile device makers. IDC said in its report that consumers are hungry for smartphones that can access the Internet and run different applications.

But the tough economic times may prevent some consumers from upgrading their phones to smartphones in 2009, largely because the prices of these devices are too high. The sweet spot in the market seems to be in the $200 range. Apple's iPhone, T-Mobile's G1, and several BlackBerry devices sell in this range or slightly lower. These devices are subsidized by mobile operators and require users sign a two-year service contract. The data services attached to these devices are also expensive, typically in the $30 a month range. But as the economic noose tightens around consumers' wallets, it's expected that these prices could keep many potential customers at bay.

It's likely over the next year that mobile operators will subsidize the cost of these phones even more to push sales volumes. But the economic malaise might also create a market for smarter, less expensive, feature phones that don't run a full operating system. These phones, which could sell in the $50-and-under range, could still provide many of the Web functions found on smartphones, such as connectivity to social networking sites, e-mail and IM.

A company called INQ is working on such a phone, and another company called iSkoot just announced on Wednesday that it is offering software to allow all cell phone manufacturers to make their cheap feature phones smarter.

But IDC's analysts believe that the fact that the smartphone market can grow at all, when the total cell phone market is expected to decline 8.3 percent for the year, indicates the strength of this segment. And the firm predicts that when the economy turns around, smartphone sales will explode. I tend to agree. This will become especially true if the economic recovery coincides with nationwide availability of new 4G wireless services from Clearwire and Verizon Wireless.

Sony Ericsson's latest quarterly results, which show a significant drop in revenue, have prompted analysts to suggest this year will be make-or-break for the mobile-phone manufacturer.

The company's results for the fourth quarter of 2008 were published on Friday. Sony Ericsson lost 187 million euros ($248 million) in that quarter--it lost just 25 million euros in the previous quarter. In the fourth quarter of 2007, Sony Ericsson made 373 million euros.

"In economic terms, 2008 has been a tumultuous year with world markets experiencing a serious downturn," said Sony Ericsson President Dick Komiyama in a statement. "The mobile-phone market has been greatly affected by this and as expected, the fourth quarter continued to be very challenging for Sony Ericsson. Our business alignment is progressing as planned, with the full effect of annual savings of around 300 million euros expected by the second half of 2009. We foresee a continued deterioration in the market place in 2009, particularly in the first half."

Gartner research director Carolina Milanesi said in a statement on Friday that Sony Ericsson's sales for the fourth quarter of 2008 came in "at the low end" of the analyst house's expectations. "The market in the last quarter of 2008 continued to be very challenging especially for Sony Ericsson which remains particularly exposed to the weakness of the Western European market," Milanesi wrote.

"We continue to believe that maintaining the third position in the worldwide ranking achieved in the third quarter of 2008 will be very difficult for Sony Ericsson," Milanesi said. "With sales in 2009 forecasted to slow down and the weakness in the European and Japanese market expected to continue, Sony Ericsson needs to build presence in markets such as North America where market share has historically been limited."

Milanesi added that Sony Ericsson's decision to join the Google-led Open Handset Alliance and the Symbian Foundation had been "the right steps," partly because Sony Ericsson has not had a significant presence in the smartphone market so far.

"We believe that 2009 will be a deciding year for Sony Ericsson as it battles between profitability and market share growth," Milanesi wrote.

The average selling price (ASP) of a Sony Ericsson handset in the fourth quarter of 2008 was 121 euros, up from 109 euros in the preceding quarter but down from 123 euros in the fourth quarter of 2007. The company attributed the quarter-on-quarter average selling price increase to "a positive impact of foreign exchange rate fluctuations and to the sale of a higher proportion of high-end models."

Currency fluctuations were also credited for a 4 percent quarter-on-quarter rise in sales (2.91 billion euros, up from 2.8 billion euros), but blamed for having a "large negative impact" on costs. Sales in the fourth quarter of 2007 totaled 3.8 billion euros, so the fourth quarter of 2008 showed a 23 percent year-on-year drop in sales. According to Sony Ericsson, this was "driven by lower volumes, due to the global economic slowdown that resulted in contracting consumer demand and decreased availability of credit."

In its statement, Sony Ericsson estimated that its market share in the fourth quarter of 2008 was around 8 percent. The company also forecast that "the global handset market will contract in 2009 and that the industry ASP will continue to decline."

David Meyer of ZDNet UK reported from London.

Nokia's still the largest smartphone vendor, but competitors are catching up to devices like the N95 shown here.

(Credit: CNET)

Smartphone sales slowed a bit in the second quarter amid a weak global economy, but Gartner thinks that's about to change.

The worldwide market for smartphones grew 15.7 percent in the second quarter, as vendors shipped a total of 32.2 million devices. That's pretty solid, but earlier this year the market was growing at a 60 percent clip. Blame a slowing economy around the world and the development of more sophisticated "enhanced phones" running Java or Qualcomm's BREW rather than true smartphone operating systems like Symbian, Windows Mobile, or Apple's OS X, according to Gartner.

Nokia is still the market leader by a huge margin, shipping nearly half of all smartphones sold in the world during the second quarter. The company is not growing nearly as fast as its rivals, however, and lost market share; second-place RIM increased its shipment totals by 126 percent to obtain 17.4 percent market share, and HTC grew its shipments 119 percent to edge out Sharp for third place.

Conspicuously absent from Gartner's top 5 was Apple, which shipped just 717,000 iPhones during the second quarter as it ran down the inventory of classic iPhones ahead of the July launch of the iPhone 3G. Apple should show up in next quarter's rankings, however, as the company sold 1 million iPhone 3Gs in just the first weekend it went on sale. Fujitsu's 1,071,490 units was good enough for fifth place for the entire second quarter.

North America is the fastest-growing region for smartphone sales by far, with shipments up 78.7 percent in the second quarter. This region accounts for just 25 percent of all smartphone sales, however, as our cousins in Europe and Asia got on the smartphone train much earlier. Western Europeans bought 29.3 percent more smartphones in the quarter, while Japanese customers actually bought 24 percent fewer phones than during the same period last year.

The picture should be brighter later in the year, Gartner said. "Wider availability of new touch smartphone models together with the global introduction of the iPhone 3G will help sales of smartphones return to stronger growth in the third quarter of 2008," analyst Roberta Cozza wrote in Gartner's press release.

In spite of the economic slowdown, worldwide mobile-phone sales rose nearly 12 percent in the second quarter of 2008 from the same period in 2007, market research firm Gartner said Thursday.

Growth was driven largely by the Asia-Pacific region, in which sales grew 20.5 percent from the second quarter of 2007, and the Middle East and Africa, where handset sales increased 18 percent.

In the United States and Canada, 6.5 percent year-over-year growth was driven largely by sales of replacement handsets, as new subscribers only trickled in, Gartner said. (Fellow research firm NPD Group, by contrast, reported earlier this month that U.S. mobile-phone sales were 13 percent down from the second quarter of 2007.)

Gartner's study did find a decrease in mobile-phone sales in Western Europe: down 8.2 percent down from the second quarter of 2007. And while the research firm forecasts 11 percent industrywide growth in 2008, it expects revenue growth to fall slightly behind that, as the economy and tougher competition take a toll on prices.

"The economic environment continued to negatively impact mobile-phone sales in both mature and emerging markets," Gartner analyst Carolina Milanesi said in a release. "Consumers in mature markets continued to favor midtier devices over high-end devices, while new subscribers continued to join mobile networks in emerging markets during the quarter. However, replacement sales remained weak, as consumers faced higher prices for fuel and food, in addition to higher levels of inflation."

The research firm has not changed its overall 2008 outlook of 1.28 billion handset sales.